Movida Participações S.A.'s (BVMF:MOVI3) Shares Leap 31% Yet They're Still Not Telling The Full Story

Movida Participações S.A. (BVMF:MOVI3) shares have had a really impressive month, gaining 31% after a shaky period beforehand. The last 30 days bring the annual gain to a very sharp 28%.

Even after such a large jump in price, when close to half the companies operating in Brazil's Transportation industry have price-to-sales ratios (or "P/S") above 1x, you may still consider Movida Participações as an enticing stock to check out with its 0.2x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

See our latest analysis for Movida Participações

How Movida Participações Has Been Performing

Movida Participações certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Movida Participações will help you uncover what's on the horizon.

How Is Movida Participações' Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as Movida Participações' is when the company's growth is on track to lag the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 23%. The latest three year period has also seen an excellent 91% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 9.8% each year as estimated by the eleven analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 8.8% per annum, which is not materially different.

With this in consideration, we find it intriguing that Movida Participações' P/S is lagging behind its industry peers. It may be that most investors are not convinced the company can achieve future growth expectations.

The Bottom Line On Movida Participações' P/S

Despite Movida Participações' share price climbing recently, its P/S still lags most other companies. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've seen that Movida Participações currently trades on a lower than expected P/S since its forecast growth is in line with the wider industry. When we see middle-of-the-road revenue growth like this, we assume it must be the potential risks that are what is placing pressure on the P/S ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

Before you take the next step, you should know about the 2 warning signs for Movida Participações that we have uncovered.

If you're unsure about the strength of Movida Participações' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.